Priya Ganapati
SAN FRANCISCO -- The countdown to video-games publisher Electronic Arts'(ERTS Quote - Cramer on ERTS - Stock Picks) $2 billion hostile bid for its smaller rival Take-Two Interactive(TTWO Quote - Cramer on TTWO - Stock Picks) has begun.
After one extension, EA's tender offer to Take-Two shareholders is set to expire midnight Friday. Many analysts and portfolio managers are betting that EA will fall far short of the majority of shares it needs to acquire Take-Two. Instead EA is likely to either extend its tender once again or announce an update to negotiations with Take-Two's management, they say. On Feb. 24, EA said it will offer $26 a share for Take-Two, a move that was rejected by the latter's management on the belief that the price significantly undervalued Take-Two. Take-Two management has since then tried to thwart a takeover by issuing additional shares. In response, EA dropped its bid to $25.74, where it now stands. On April 18, EA said that it has gathered about 9% of shares in Take-Two. It is unlikely EA could have bagged much more since then, says Darren Chervitz, director of research at Jacob Internet Fund, which has Take-Two among its top holdings. Jacob Internet Fund hasn't tendered its shares to EA and Chervitz says he doesn't plan to for now. "Take-Two's stock is trading two dollars above the tender offer," says Chervitz. "So why would any investor tender to EA when they might as well sell it in the open market?" Take-Two's stock closed up 36 cents, or 1.3%, to $27.33 Thursday. Shares of EA were down $1.26, or 2.4%, to $51.52 Thursday.
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